The table given below shows the average total cost of production of a firm at different levels of the output. Table 7.5
In Table 7.5, if the total fixed cost is $3, what is the total variable cost of producing 5 units?

Question

The table given below shows the average total cost of production of a firm at different levels of the output. Table 7.5
 In Table 7.5, if the total fixed cost is $3, what is the total variable cost of producing 5 units?

Quizplus · Accepted Answer

Using the formula for calculating total cost:
Total Cost = Total Fixed Cost + Total Variable Cost
We know that the total fixed cost is $3. 
To calculate the total variable cost of producing 5 units, we need to look at the row corresponding to 5 units in the table. We see that the average total cost at 5 units is $10, and the average fixed cost at 5 units is $3. 
Applying the formula for average total cost:
Average Total Cost = Total Cost / Quantity 
We can rearrange this formula to find Total Cost:
Total Cost = Average Total Cost x Quantity 
Thus, Total Cost of producing 5 units = Average Total Cost x Quantity = $10 x 5 = $50 
To find the Total Variable Cost, we need to subtract the Total Fixed Cost from the Total Cost: 
Total Variable Cost = Total Cost - Total Fixed Cost 
Total Variable Cost = $50 - $3 = $47 
Therefore, the total variable cost of producing 5 units is $47, which is option B.

The Table Given Below Shows the Average Total Cost of Production